Friday, December 17, 2010

Unintended Consequences

What has always been a subject of fascination for me is how decisions carefully made in Washington meaning both studied and analyzed with great care by a full range of interested parties can often have devastating secondary and tertiary impacts down the road where the proverbial "rubber" meets that road.

With most of Washington engaging in what I call "gunslinging" meaning no real care or attention to the fallout from government decisions the liklihood of adverse impacts are likely to grow not just incrementally but out of all proportion to the original decision makers intentions!

Two recent examples come to mind. Looks more and more like a formal downgrading of US debt given the further erosion of the fiscal outlook by the new about to be enacted tax bill. Obviously a much smaller example, but Ireland followed and attempted to comply with EU rules, was bailed out but only at enormous long term costs to the stability of Irish society, and now the bond ghouls and rating agencies are about to hammer Ireland for good. My suggestion of course is that they seek US STATEHOOD as their best out from the dalliance with the EU. So why mention Ireland. Because the future downgrading of US debt, the disasterous management of US oil and gas resources by the private sector which at least to some degree operates to exploit those resources and recieve the benefits but little of the long term costs environmental and otherwise is a first choice. I will always beleive that gas prices at the pump in the spring of 2008 which reached over $4 per galleon was a major understudies driver in the financial collapse as Americans came to realize how screwed they were by their choice of distant locations from jobs and their inability to move from their overpriced housing. Second, events are moving a fast pace internationally and almost any event could have drastic fallout for the US. Examples, fall of the Royal family in Saudi Arabia or the failure of the succession in Egypt and the radicalization of that countries leadership. Hey why do you think Chavez in Venzuela has purchased Russian air defence weaponary. And by the way many air defence missiles can also be used surface to surface.

My points consolidate over finances however. And with the extension of the Bush tax cuts the liklihood of a downgrade of US debt becomes even more likely. And "stagflation" looks like the policy choice of the FED as it continues to focus on inflation of on the books bank assets and ignore the plight of the average American.

And in a more restricted example, the HOMELAND SECURITY Department for the first time will face operations under a Continuing Resolution for the entirety of the year. The Omnibus Appropriation Bill incorporating the work of many committees and also their earmarks is not going to become law necessitating a CR for the rest of the year. That fact alone will result in some intended and unintended consequences and allow OMB among other factors to really screw up the Executive Branch. Why? Because OMB is the enforcer on CRs by making sure that the lowest possible expenditures (obligations) are made by Executive Branch components, even much lower than intended by the Congress. In the NIXON administration impoundments of appropriated funds were rules to violate appropriation mandates. But with a CR the OMB can practically impound all it wants without restriction by the way it apportions and allocates funds, a mandatory first step before departments and agencies can obligate funds.

And always remember, OMB is never really interested in the following: Homeland Security or civil security generally; disaster relief and recovery; mitigation and prevention and protection of the public's safety, the regulatory missions of the departments and agencies that are not so-called "independent regulatory agenices" whose budgets are technically approved by OMB but in reality offlimits to OMB restrictions. Those "independent regulatory agency" budgets in the big picture are so miniscule anyway that OMB does not get must fiscal discipline bang for the buck by tampering with them. And of course industry lobbyists constantly hammer regulatory agency budgets through Congress and OMB so that they can escape regulatory pressure.

All this adds up to katy bar the door for the next 9 and 1/2 months. A new majority in the House of Representatives will add to the confusion. The OBAMA administration will desperately need some supplemental money this fiscal year including war fighting and I fully expect that to be fully offset with budget cuts in current appropriations. In other words WASHINGTON is in a worse mess than any could have imagined due to the change in the majority in the HOUSE and the almost total incompetence of the OBAMA Administration. It is not going to be fun to watch as the STATES and their local governments public safety and EM budgets shrink drastically. Can the system be repaired? Yes but not very quickly or easily!